The Greatest Deception in the History of Finance

December 2, 2009 1:02pm by

What is the greatest deception in the history of finance? Depending upon your perspective, some entities and events of deception that come to mind might include corporate accounting scandals, rogue traders, Ponzi schemes, and various entities and events related to the financial crises (market bubbles) throughout history.

“The greatest hazard of all, losing one’s self, can occur very
quietly in the world, as if it were nothing at all. No other loss can
occur so quietly; any other loss — an arm, a leg, five dollars, a
wife, etc. — is sure to be noticed.” ~ Soren Kierkegaard

In terms of damages caused by these entities and events of deception, the financial losses, some of which are in the hundreds of billions of dollars, are the most tangible and easiest to measure. Using the most recent and obvious reference point, the current financial crisis slashed retirement assets in 2008 by nearly $4 trillion, as reported by Reuters. This decline in assets is epic in proportion; but what is the non-monetary cost and what led most of these people to place their life savings in the stock market to begin with?

Returning to the question of what is the greatest deception in the history of finance, consider this scenario: Hundreds of millions of people are led to believe that one particular financial pursuit, which, to accomplish, requires the largest financial effort of a lifetime; but more importantly, and for most people, it is also the most physically and emotionally taxing effort of a lifetime; working in various unsatisfying and stressful jobs and sacrificing meaningful pursuits for this one financial pursuit; and the effort requires 30, 40 or even 50 years of time, assuming the end destination of this pursuit is ever reached — or if it even exists… and this doesn’t include the $4 trillion decline (see above)…

This financial pursuit, this deception, is called financial freedom.

“Man acts as though he were the shaper and master of language, while in fact language remains the master of man.” ~ Martin Heidegger

The idea of financial freedom is no conspiracy to deceive the masses; but it sure has sold unimaginable amounts of financial products and services! Furthermore, how many books, websites, blogs, magazine articles, media advertisements and financial planning sessions have used the term financial freedom as leverage to sell something?

Financial freedom is such an overused and abused term that its meaning is bordering on abstract. As of this posting, a Google Search for “financial freedom” produces more than 33 million results. What is financial freedom anyway? Who decides the meaning? How can one be free if their idea of freedom is defined by someone else, or not defined at all? Does financial freedom even exist?

Common words, phrases and abstract ideas can be practical for use in language and mass communication; but for an individual to spend the predominant amount of financial and non-financial resources of a lifetime for something that has not been clearly defined for the individuals particular life, how can this not be described as anything but aimless, illusory or even the greatest deception in the history of finance?

“Ever more people today have the means to live, but no meaning to live for.”~ Viktor Frankl

The true deception of financial freedom need not be blamed on anyone but oneself; however, this is not necessarily an intentional deception — it is a result of the human condition. As humans, we are constantly searching for patterns that will reveal the shortest distance from point A to point B; and we are searching for meaning and fulfillment; but we trick ourselves into believing that we are searching for pleasure — and money buys pleasure, at least according to the thousands of implicit and explicit messages we receive on a daily basis.

Certainly, the messages of media noise and social conventions are difficult to ignore. Nearly every media (print, television, Internet) image you’ve seen in your life implies that your current existence is lacking something — and this something is a certain article of clothing, a watch, a beverage, a pill, a car, a house, an investment strategy or particular physical appearance — to be somebody other than who you are now — all of which can be purchased with money (whether it be your money or someone else’s money).

So, if wanting more is a natural human behavior and we are deluged daily with enticing messages that encourage and support this behavior, what can be done, if anything, to manage this challenge? To help make my point, I will defer to an anecdote delivered to MBA graduates of Georgetown University, back in 2007, by Jack Bogle, founder of Vanguard:

“At a party given by a billionaire on Shelter Island, the late Kurt
Vonnegut informs his pal, the author Joseph Heller, that their host, a
hedge fund manager, had made more money in a single day than Heller had
earned from his wildly popular novel, Catch-22, over its whole history. Heller responds, ‘Yes, but I have something he will never have: Enough.’ “

In summary, the best way to “get rich quick” is to be content with “enough.” What greater tragedy can there be than to chase something for one-half to two-thirds of a lifetime that may not be actually acquired by the means for which you have sacrificed?

“If thou wilt make a man happy, add not unto his riches but take away from his desires.” ~ Epicurus

To conclude, there is no such thing as financial freedom, at least not in the conventional sense of the term, which is the great deception. Paradoxically, the pursuit of financial freedom is closer to slavery than it is liberating. Furthermore, and in my humble opinion, freedom cannot be procured by financial means — freedom most likely lies at the point at which the utility for money begins to diminish — the point at which the basic sources of physical well-being — food, shelter and clothing — have been met. Beyond this point, freedom cannot be procured by financial means, yet millions continue pursuing the idea of financial freedom. This is the deceit. This is the illusion.

True freedom begins by learning contentment — by the realization that you already have “enough” — where the search for pleasure can be replaced by the search for meaning.